Jul 6, 2012

Gamble on grass

Time to pray for rain, just don’t pray too hard. We certainly don’t want it all at once. Recent weather patterns have been very disturbing. It’s hard to make any kind of feed without water and we’re past the point where we’re going to make any summer pasture that is worth much. I hate to be the pessimist, but it’s a fact that it’s getting too dry in too many areas and we will certainly have some challenging times ahead. We thought beef prices were high this past year, but cinch up, they will go higher.

Cow slaughter is certain to go higher. I’m surprised we haven’t seen $1 slaughter cow prices, especially since the cow beef cutout is at a record level. Just stop and think about it. Boning slaughter cows are trading between $82 and $85 per cwt. And the cow beef cutout was last quoted at $172.24. The sum of the cutout is 49 percent of the live price. A Select fed steer sold for $116 last week and the Select cutout was $176, so the live price would be 65 percent. Seems to me there is a pretty good margin in the cow beef business selling loins and other high value primal. It isn’t all going to make ground beef.

So we need to get a little more value out of these slaughter cows. And with this dry weather, we’ll certainly see more of them coming to market unless we can make some cheap feed.

These corn reports are getting entertaining all of a sudden. USDA is still hanging on to their optimistic projections of 166 bushels an acre while many of the private and Extension service corn reports are a bit more realistic. Informa Economics has posted their forecast a couple weeks ago at 155 bushels, while one other group that wished to be anonymous was forecasting corn yields to be 145.3 bushels per acre. It’s becoming clear that we’re not going to see the record-breaking corn crop we were forecasting just four weeks ago.

Aside from the corn, the hay crops are getting a little sketchy too, even for the guys who flood irrigate. Most of the snow pack in the mountains was not up to normal and this extremely hot weather is accelerating the runoff, leaving little chance for any late season irrigation, unless your irrigation district has a good reservoir system and hasn’t had too many calls for water.

What’s surprising is just how well the cattle market is doing. I still think the best way to get a good idea on what your cattle are worth is watching the big video sales. These big summer sales are the market makers for the year. Last week, Superior Livestock Auction held their Week in the Rockies Sale. That sale has grown so much that it used to be called Weekend in the Rockies Sale, but now takes five full days to get the deed done. However, this year’s sale was off quite a bit in terms of numbers. They only had 250,000 head when they are usually well over 300,000 head. Perhaps cow/ calf and yearling producers are looking at the fall futures and holding off, or maybe they are thinking this weather will make it a little tough on how to weigh their cattle. Let’s face it, no one likes to slide their price because they didn’t weigh in right.

I would have to say the highlight of Superior’s sale was a set of ultra-light steer calves from TA Ranch, out of Saratoga, WY, that were VAC 45, Superior verified, weaned steer calves that brought $286 per cwt. And the heifer mates sold for $238.50. All for November delivery. It’s kind of surprising that the heifers would sell $50 behind the steers. With a sale like that, it makes this calf market look pretty good right now. But it’s going to take a lot of grass to get these calves to feeding weight this fall. Yearling prices in this last sale were respectable but nothing like those light calves. This is one of those years where we’re going to see calf prices decline.

But calf prices going forward will certainly have some pressure on them. Six weeks ago in Oklahoma City, 500 to 600 pound calves were at $181.60.

Last week they were trading at $166.60. We have a definite shift in this market and it’s all around how much grass can be produced this summer. Right now it doesn’t look good in most parts of the country; the northern tier of the U.S. is about the best looking area right now. But things change, and we all know that if we haven’t seen the rain yet, summer grazing is going to be a gamble. But, what hasn’t been a gamble in the cattle business? — PETE CROW